In this episode, Partner Richard Wells and Senior Associate Sarah Redding from our Corporate and Commercial team discuss Heads of Agreement (HOA) and Letters of Intent (LOI), examining why parties turn to them, what can go wrong, and steps to take to ensure these preliminary documents work for you, rather than against you.
[01:09] Richard and Sarah explain how HOAs and LOIs function as preliminary documents, typically used in situations where there is commercial urgency to quickly define the parameters of a transaction, setting out the key commercial terms of a deal before the parties negotiate a full long form agreement.
[03:06] Sarah considers the commercial appeal of these types of documents - how their speed, flexibility, and ability to signal commitment can rapidly build deal momentum, but notes that this can come at a cost. She then highlights the major risk: the “gap problem,” where such high level drafting leaves out essential terms, creating uncertainty and exposing parties to unforeseen issues further down the track.
[04:19] Richard talks about the confusion that can arise around which parts of an HOA or LOI are legally binding and how this is legally determined.
[05:28] They discuss how signing an HOA or LOI can often slow momentum toward a full formal agreement, as early performance can create a “deal feels done” mindset. This can result in these preliminary documents governing the parties’ relationship for much longer than originally intended and a risk that they are locked into arrangements that were never intended to be the final word.
[07:43] Sarah outlines practical steps parties can take to protect themselves when entering into such documents, including evaluating whether an HOA or LOI is actually necessary in the first instance, being explicit about binding terms, using sunset clauses, and involving lawyers early.
Information in this episode is accurate as at the date of recording, 24 February 2026.
Please contact Richard Wells or our Corporate and Commercial team if you need legal advice and guidance on any of the topics discussed in the episode.
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